Senegal’s bonds fell sharply after Prime Minister Ousmane Sonko resisted calls from the IMF to restructure its debt, narrowing the options available to fix the country’s fiscal crisis.
Its finances have been under pressure since a government audit last year discovered unreported debt left by the prior administration that is now worth more than $11 billion. It prompted credit-rating downgrades and the IMF to freeze Senegal’s $1.8 billion program.
Sonko, addressing members of his party at the weekend, said he rejected proposed restructuring because Senegal would be seen as “a country on the verge of bankruptcy,” which would deter investors. His comments came days after an IMF team completed a mission to Dakar without agreeing a new lending program.
Absent debt restructuring, Dakar would be forced to rely on domestic funding and spending cuts. The government unveiled an economic recovery plan in August, 90% of which it said would be financed through domestic resources to avoid incurring additional debt. Any push to impose austerity measures could carry risks: Kenya, which is also grappling with a large debt burden, was rocked by protests last year over tax hikes.